With Extract under a trading halt pending an announcement relating to discussions between KAH and CNOOP I am naturally curious, as a holder of both KAH and EXT, what the content of the announcement will be. Presumably interest in this situation has waned on this board.

Well called Mark, I hope you got most of the 14% rise.

"Extract Resources Ltd., aiming to build the world’s third-largest uranium mine, rose the most in six weeks in Sydney after saying development work will continue even as Namibia plans to take ownership of all mining rights.

Extract rose 14 percent, the most since March 21, to A$7.63 at the 4:10 p.m. close in Sydney, while the benchmark S&P/ASX 200 Index dropped 0.9 percent. The explorer is proceeding with drilling and plans to develop the Husab project in Namibia, the Perth-based company said today in a statement."

http://www.businessweek.com/news/2011-05-04/extract-climbs-in-sydney-after-saying-mine-work-proceeding.html

With KAH making up 6.5% of my portfolio I was pleased (relieved?) to sell out this morning to bank a decent profit.  Chances are I'll be leaving  plenty for the other guy but protection of capital takes precedent.

fuiseog

Oops, should have checked for an RNS, and there is one to confirm the position:-

“The Panel Executive has ruled that CGNPC-URC is not permitted to announce a firm offer for Kalahari at 270 pence per share, even with the agreement of the Kalahari Board"

http://www.investegate.co.uk/Article.aspx?id=20110503165850P34BC

Both prey and predator have landed themselves, and us, in a right old mess here.

fuiseog

Fun & games.

FT Alphaville reporting that China Guangdong Nuclear Power Corp wants to reduce it's 290p offer per share to 270p because of the Japanese nuclear problem.

But the Takeover Panel says this is against the rules. An original offer, made without a reservation that allows repricing, cannot be altered during the offer period or up to 3 months after it. The KAH Board are appealing. If the appeal fails CGNPC can pay the full 290p now, or wait 3 months to make a lower offer.

fuiseog

The real announcement has now been issued (just before the 5pm deadline): http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=10854983 

CGNPC offer still on - but at a reduced price of 270p, post-Fukushima. However, the Takeover Panel is blocking it, it appears due to a technicality in the offer documentation, which Kalahari & CGNPC are appealing. Meantime, deadline has been extended to 16th June. We'll find out what Extract's Board thinks tonight.

The fact that the offer is still on, albeit at a price reduced by ~7%, shows that CGNPC is not concerned about the award of a mining licence.

I do not believe this morning's announcement by Kalahari justifies the trading halt in Extract's shares announced yesterday (i.e. Sunday night UK time). Moreover, from the CGNPC offer announcement:

Kalahari has entered into the Implementation Agreement with CGNPC-URC, which sets out certain steps to be taken by both Kalahari and CGNPC-URC to effect the transaction. The Implementation Agreement contains obligations for each of Kalahari and CGNPC-URC to pay the other a break fee of £7.5 million (the “Break Fee”) in the  

following circumstances...

 

 ...Save as set out below, CGNPC-URC shall pay the Break Fee to Kalahari if, by 5.00p.m. on 3 May 2011 (or such other date as may be agreed between CGNPC-URC and Kalahari), CGNPC-URC has (i) not satisfied or, if applicable, waived each of the Pre-Conditions set out in paragraph 9 above (other than Pre-Condition 5 and Pre-Conditions 2 and 3 in the circumstances described below); (ii) not released the Rule 2.5 Announcement; or (iii) inserted an offer price in the Rule 2.5 Announcement of less than 290 pence per Kalahari Share. In addition CGNPC-URC shall pay a Break Fee to

Kalahari if the Offer Document is not sent to Kalahari Shareholders within 14 days of the Rule 2.5 Announcement or CGNPC-URC is in material breach of (i) certain of its obligations under the Implementation Agreement; or (ii) its obligations under Rule 31.8 of the Code to pay the consideration monies to the Kalahari Shareholders.

 3.5 hours and counting ;0)

At Extract's current SP, I calculate that Kalahari's NTAV is only 203.6p - so either Kalahari is overvalued or Extract is undervalued. I suspect the latter and depending on what is announced, and assuming the trading halt is lifted, I may well be a buyer of Extract tonight.. ;0)

Cheers,

Mark

And statements today from Extract and KAH expressing confidence that the views expressed by the Minister will not affect them.

"The Honourable Minister assured us that the new policy will NOT apply to current licences"

http://clients.weblink.com.au/clients/extractresources2/article.asp?asx=EXT&view=6540015

It probably is a storm in a teacup but I decided to sell anyway. I prefer to crystallise a very substantial profit at the current level rather than risk it by ignoring signs and portents.

URU did v nicely for me previously, so a second courtesy of KAH is more than acceptable......

http://af.reuters.com/article/investingNews/idAFJOE73R00H20110428?sp=true

http://www.namibian.com.na/news/full-story/archive/2011/april/article/panic-in-mining-over-epangelo/

Storm in a teacup, I hope - I don't believe they can be thinking of confiscating these large holdings of Korean, Japanese, Iranian etc interests.

Interview with Mark Hohnen on Reuters:

LONDON, April 5 (Reuters) - Kalahari Minerals (LON:KAH) said talks with its suitor state-owned China Guangdong Nuclear Power (CGNPC), which followed the nuclear crisis in Japan, did not include a lower offer price.

"In the three days I was with them there were no discussions on price. The topic of price wasn't raised once," Kalahari's executive chairman Mark Hohnen told Reuters on Tuesday.

CGNPC's proposed 756 million pound ($1.2 billion) offer was announced on March 7 just days before events at Japan's Fukushima nuclear reactor sparked fears of a radiation disaster, leading an official from CGNPC to tell Reuters on March 24 that the Chinese company may cut its proposed offer.

Uranium stocks dropped following Japan's nuclear crisis with Kalahari's shares falling as low as 192 pence compared to the offer price of 290 pence.

Kalahari holds around 43 percent of Extract Resources which earlier on Tuesday said a feasibility study showed that its key Husab uranium project in Namibia was economically viable.

"I had a meeting the week before last in Beijing and am going down to Namibia this week and meeting with various representatives there," Hohnen said.

"The Chinese deal as far as we are concerned is doing exactly what it's supposed to be doing during the eight weeks between now and May 3," he said.

"Ever since we started the process they have done everything that they've said they are going to do. They haven't left me surprised at all by anything."

Hi Mark,

It seems to me that China is already 'on the hook' as regards sourcing uranium for its nuclear plant pipeline.

The current 'low-ball' offer for KAH was at risk of being trumped by other players (we PI's fondly imagined).

It's at least possible that the Chinese won't seek to 'nickel and dime', they won't need to, as it's unlikely that a Western , shareholder-accountable rival will in present circs be minded to counterbid aggressively....

If China Inc (CGNPC ) pays what in current climate is a 'full ' price for KAH and then controls the resource from which RIO (China Inc =Chinalco) can benefit - and has locked up a supply of uranium for its entire nuclear programme - then it seems to me that 'China Inc.' has achieved its strategic objectives..... a few hundred million here or there will be incidental !

KAH showing a sudden big drop this morning. Currently down 38p, some 16%, and a good way below indicated bid. Does someone know the bid is being cancelled; overdue reaction to Japan disaster; Chinese announcement of a review of nuclear capacity?

Might be a good time to pick up a few for when the crisis ends.

Devymaster

Mark, I've just been trying to work out what the above statement means when it says "make an offer for Extract on terms no less than equivalent to those offered to Kalahari shareholders".

• CGNPC are offering 290p per KAH share, or £756m in total.
• KAH own 107,342,087 EXT shares.
• Remove KAH's 45% stake in North River Resources (LON:NRRP) (£11m)
• CGNPC are offering £6.94 per EXT share
• GBP1:AUD1.60264
• CGNPC are therefore offering AUD11.122 per EXT share.

EXT closed at AUD9.28 on Monday 7 March, so the offer represents a premium of 19.8%.  This is clearly better than the premium to KAH's share price on Friday 4 March of 11% because of KAH's discount to NAV.

Meanwhile EXT was up to AUD10.73 overnight so it may not go up very much tonight if the market believes the CGNPC offer won't be beaten.

Do you have a view on whether other EXT shareholders would accept AUD11.122?  Clearly it would be easy for CGNPC to get over the line from a starting point of 43%, but they may only want the uranium supply rather than the hassle of running the mine?  Fascinating machinations playing out!

SM

Great article here, outlining the regulatory environment applicable to CGNPC's bid. These paragraphs are crucial:

...CGNPC, in any case, needs relief from ASIC to acquire more than 20 per cent of Kalahari, because once it does so it would also acquire a deemed relevant interest in Kalahari's 42.79 per cent shareholding in Extract, and that would breach the fundamental takeover requirement, Section 606 of the Corporations Act, which prohibits a party from acquiring more than 20 per cent of a company without first making a takeover bid to all shareholders.

CGNPC has stated that it intends to seek relief from ASIC to enable it to acquire more than 20 per cent of Kalahari, but Extract said yesterday it would make submissions that the relief not be granted unless the Chinese group also makes an offer for Extract on terms no less than equivalent to those offered to Kalahari shareholders...

 

Cheers,

Mark

Hi T,

'Great' minds think alike..........but you've summarised it much better.

With a holding that's crept up to c. 8% of my portfolio I won't be going for your option 3, but with the scale and quality of the resource underpinning value it can't be 1 either. There is a temptation to top slice, but I won't for the moment.

A huge thanks to Mark for sharing the outcomes of his excellent research.

Exciting times!

fuiseog

The question is of course what to do now?

there are, as always 3 options:

1) sell into strength to secure the current bid terms - it might fail and the SP might fall back - in any event, it is currently possible to sell at a price higher than the takeover offer

2) hold to see if a better offer materialises - as seems likely

3) buy more to squeeze the last bit of juice in the event of a better offer - downside is limited if that doesn't happen and the current bid goes through

My current holding is about 4% of my portfolio and was bought at 148p (thanks to Mark's diligence and generosity). The old style Tournesol would have already taken step 3 with the objective of maximising gains. The new style T is more focussed on risk management/mitigation and is debating between 1 and 2 with a default of 2.

Decisions, decisions, decisions......

T

H/T to harlee7 on another site for finding this juicy tidbit in that esteemed financial organ, The Sun:

KALAHARI MINERALS jumped 24.75p to 285p on news of an approach. Word is rival RIO TINTO, down 100p at 4209.75p, has given Kalahari the once-over and may be ready to offer 400p a share. That would value the company at almost £1billion.

Cheers,

Mark

Offeror announced as China Guangdong Nuclear Power Corp ("CGNPC") with a recommended offer of 290p per Kalahari Minerals (LON:KAH) share, which strikes me as a rather measly premium.  Irrevocable undertakings of Directors to sell to CGNPC can be revoked with an offer 5% higher i.e. 304.5p+.

So the Chinese are looking to gain control of Extract and the Husab mine - let's see if a counteroffer from Rio Tinto (LON:RIO) or another third party is flushed out in the days ahead... 

The beginning of the end game for Extract Resources?

Kalahari Minerals PLC

Statement re Possible Offer

The Board of the Company notes the recent rise in the Company's share price.

On 21 February 2011 the Company announced it was holding discussions with Extract Resources Ltd (`Extract'), in which Kalahari holds an approximate 43% interest, to explore various different options that might simplify the Extract/Kalahari shareholding structure to facilitate a combination of Extract's Husab Uranium Project with the neighbouring Rössing Uranium Mine owned by Rio Tinto plc. These discussions remain ongoing and there is no certainty that the parties will reach any agreement.

The Company further confirms that it is in talks with a third party, which may or may not lead to an offer being made for the entire issued share capital of the Company. Discussions are continuing and a further announcement will be made when appropriate.

http://www.investegate.co.uk/article.aspx?id=20110307102745P4A8F&fe=1

http://www.theaustralian.com.au/business/wealth/uranium-creeps-up-on-fad-rivals-mining/story-e6frgac6-1225945349257

Extract Resources (EXT) blips loudly on Criterion's radar. Extract hopes to develop Rossing South in Namibia, the world's fifth biggest uranium deposit. "We have estimated the project will reach first production by 2015 at the rate of 14.5 million pounds a year, with capital requirements of $1bn," broker Patersons says.

Also, not strictly about Extract, but worth a read (just for the rant) is: 

El Oro Chairman's statement and prelims

Best, Xig

Introductory write-up on Kalahari Minerals and Extract Resources, at: http://www.early-retirement-investor.com/kalahari-minerals.html

Oh... and another thing: http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Nuclear/6513116

Production loss means ERA will buy uranium to cover contracts

Barcelona (Platts)--13Oct2010/1144 am EDT/1544 GMT

 

Uranium miner Energy Resources of Australia said Wednesday it would have to buy uranium to cover contractual commitments after disappointing production from its Ranger mine in Australia.

Lower ore grades at the mine have resulted in lower than expected production, leading ERA to revise its 2010 production estimates downward to 3,900 mt of uranium, from earlier estimates of between 4,300 and 4,700 mt.

 "Additional supply requirements necessary to meet 2010 sales commitments, anticipated to be around 5,000 mt, will be mostly covered by purchases," the company said.

Profits will be hit, ERA warned, since "the small price margin associated with the sale of the purchased material is more than offset by the on-going costs of operation."

ERA is 68% owned by Rio Tinto.Uranium oxide production by ERA for the 2010 third-quarter was 911 mt, 10% higher than the previous quarter and 35% lower than the corresponding period in 2009.

Combined with the timeline of events I've outlined in my last post, surely this must ramp up the pressure on Rio to act, to secure its future in the U industry? Once in full production in 2015, Extract should produce 6,820 mt p.a.with a mine life of 20 years++ (see Vission newsletter linked above).

Mark

Lots of new info out today:

Quarterly Cashflow Report

Quarterly Activities Report

Swakop Uranium September newsletter (Swakop U is Extract's Namibian operating subsidiary)

• Looks like we've got enough cash for another 6-9 months. Funding for mine development should be finalised in that timeframe.
• On track for DFS and mining licence application this quarter (those will be major events, IMO)
• New head of marketing and business development manager appointed. Seems like an appropriate management team is being put in place, and actions are being taken, for a serious second tier miner, as opposed to a junior.

This is getting exciting now, as we get close to a crticial point in Extract's evolution!

Cheers,

Mark

Thanks for your kind words Mark - much appreciated.

I agree, what happens with Epangelo is v important, and key to the government expediting the Mining Licence.

Nice problem to have though. Keeping everything else equal, with a discount rate of 8%, then I make the current NPV A$16.7

Depending on who's out there and interested, IMO a takeover at A$20 is not unreasonable for such a strategic deposit.

Conversely, I'll look for A$40+ in 5 / 6 years and a dividend of A$2

;-D

Chris

Hi Chris,

Epangelo's problem is that it doesn't have any money. ;0) ...yet it wants to acquire a stake in the Husab project, without acting in a manner that would be seen by international observers as appropriating assets.

The solution? ...My thinking is that it could become a member of a consortium that finances the development of the Husab project. In exchange for gaining government favour, the other consortium members would give Epangelo a free carry. I believe that would work for all concerned.

There are various ways that the financing could be arranged, right from an outright T/O of Swakop or Extract to the provision of a substantial debt-style facility, in exchange for offtake agreements and a modest % of the project. On reflection, it is not surprising that reaching a deal is slow process, there are so many possible permutations. Results of the DFS, however, will form the basis for negotiation, though I'd expect negotiations to be well advanced before the DFS is in the public domain.


By-the-by the appropriate discount rate (or WACC) will be one of the key negotiating issues, but I'd expect the sort of WACC figure being discussed to be more like 8%, in the current climate. In terms of short-term share price movements, yes, analyst NPVs & price targets should be around the levels you indicate. However, that should all change once a deal is done - and it becomes clearer what value industry partners put on the project. Your calculations show just how cheap Extract and Kalahari are at the current level, using even very conservative estimates.

No criticism whatsoever of your methodology intended.

To support your view that Extract could rival Cameco (current net production ~20Mlb p.a.), it is worth noting this from Kalahari's interims:

All these results, and a further 6km of the entire 15km Rössing South Anticline yet to be drill tested, provide further credence for the commissioning of multiple mining operations across Husab.

The 15Mlb p.a. currently scoped is based purely on zones 1 and 2. Zones 3, 4, 5 etc could lift production well beyond that, ultimately, though that won't be evident from the DFS.

Cheers,

Mark

Hi Mark,

I think its very likely the BEE process will involve Epangelo buying a stake in Swakop Uranium. In many ways, I think a good outcome would be Extract selling 20% of Swakop to Epangelo for a reasonable sum (~US$500 - optimistic I know) and the rest of the mine financed by debt.

I agree that using a discount rate of 12% is high, but as you say that's what the analysts are using. The instos are crucial here (like in Dana) and if they and their analysts are going to use a discount rate of 12%, then so will I (at least for the bear case).

For the bull case, I know you have read it, but for others can I suggest Cameco's Annual Information Form. At page 54 (confusingly, its page 55 on the PDF), it says Camecos share of total reserves are 478m lbs U3O8. I can see that potentially Zones 1 - 4 of Husab might equal this. Plus the elephant in the room is Zone 5. Personally I think that, unless its taken over, Extract will rival or surpass Cameco within the decade. In 2007 Cameco was about $50 per share (about US$20b). If Extract equals that performance, that gives a potentially 20fold increase on where we are now (assuming minimal dilution). And all that for a boring, old fashioned mine, that doesn't have to use any fancy new tech...

Well worth holding for IMO

;-)

Chris

Thanks Chris,

...then I agree that your A$9/share figure is highly conservative. I don't see that the BEE process will directly bring in funding. However, it is possible that a consortium, including Epangelo, will take a stake in the project in exchange for funding it.

The 12% discount rate is very high, considering a) the current low interest rate environment; b) relatively low technical risk in the project. I note how ee complains that analysts are using unrealistically high 10% discount rates when valuing oil assets! Though, admittedly, I don't entirely agree with him, I do feel that 10% is a sufficiently conservative figure for this project.

Cheers,

Mark

Hi Mark,

Thanks. Sorry for the delay in answering your questions (day job intervenes):

• My reason for using the spot price is that Cameco is achieving an average price close to the spot price (link to Cameco second quarter results)
• I'm using a discount rate of 12%
• Earnings in USD. Exchange rate 1.1:1 ASD:USD (currently closer to 1:1)
• I assume that the tax losses are used during the time to full production, with taxation at 37.5% thereafter (I agree with your interpretation of Namibia's tax regimen)

I think it likely that Extract will achieve a higher U price, and I also think that the BEE process will result in significant funding of the mine development. But I am deliberately being pessimistic to minimise the downside risk of my model. I hope that there is a takeover in the short term for a healthy premium. But, if Extract goes onto mine Husab, I suspect I will never sell a single share of my current position and will enjoy the dividend income!

Best wishes,

Chris

Worth pointing out that IMO Kalahari is currently trading at a 15% discount to NAV:

Extract holding: £1.66 per KAH

North River Resources: £0.04 per KAH

Cash (£23.67m - from interims): £0.10 per KAH

Total NAV £1.80

FWIW, I make Extract's NPV A$9 (ish) based on the current U3O8 spot price and not using the long term U price (for caution's sake). Assumptions: US$1b borrowings (30:70 equity/borrowing split to fund mine development, US$1.3b estimated to fund mine + water, power, etc), 80% working ownership of Husab (BEE involvement - assuming no financial contribution), commercial mining commencing in last Q2013, and taking 30 months to ramp up to full production.

Waiting for the DFS and trying to ignore the daily fluctuations. Ho hum, back to the day job.

Chris

I'm thinking of taking advantage of the current KAH shareprice weakness to swap my shareholding for spread bets, with a view to repurchasing in an ISA if in due course KAH and EXT merge and take a main market listing.

Does anyone have an idea how long it might take this to happen? IG give a choice of Dec '10, Mar '11 and June '11, with steadily worsening spreads. I'm inclined to go for March. Is that too optimistic?

Added a few Kalahari  @ 157p today...

The spot U price is rising: http://www.uranium.info/index.cfm?go=c.page&id=103

Buyers have shown a willingness to pay higher prices, but sellers are limited and current supply for 2010 delivery is relatively thin. As a result, TradeTech’s Uranium Spot Price Indicator is $48.00 per pound U3O8, an increase of $1.25 from last week’s value.

EXT's SP is also rising from a recent low, after it appears that a fund sold out  (see http://www.sharescene.com/index.php?showtopic=906&#entry721147 for further details - sulla's comment has been indepedently verified to me) . The DFS approaches, together with the mining licence application. IMO these will need to be accompanied by some clarity on funding for mine development - at which point I am confident that Extract & Kalahari will combine, eliminating Kalahari's 10% discount to NAV.

Extract's annual report was published today: http://www.extractresources.com/DesktopModules/Bring2mind/DMX/Download.aspx?EntryId=3513&PortalId=13&DownloadMethod=attachment

Cheers,

Mark

A comprehensive AV presentation by Jonathan Leslie, given at the current Australian "Africa Downunder" conference has been made available today, here: http://www.brr.com.au/event/68557/extract-resources-presentation-at-the-paydirt-africa-downunder-conference-2010-jonathan-leslie-ceo?popup=true&wl=146

Nothing dramatically new but JL confirms that the current CAPEX estimate is for plant construction only and does not include infrastructure or mining costs (CAPEX for these is assumed to be met by third parties and included in the OPEX).

Mark

JORC resource upgrade out: http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01086997

Indicated resources for zones 1 & 2: 257Mlb @ 480ppm
+Inferred resources for zone 1,2,3 & 4: 110.3Mlb @ 400ppm

=367Mlb total for Rossing South (+ ~25Mlb @ Ida Dome)

...Mr Leslie also added: "The immediate priority remains completing the Definitive Feasibility Study on Zones 1 and 2 to bring these deposits into production within the shortest possible tome frame. Seveteen drill rigs remain on site with the current focus on completing the drilling required to define Measured resources within the Zones 1 and 2 starter pits.

"Once the resource update has been optimised additional drilling will be planned, aimed at converting additional Inferred Resource material to Indicated status amd defining additional resources down plunge of high grade domains. An updated resource is expected within Q1 2011.

"Significant exploration potential remains to be tested throughout the Husab Uranium project, with 7 of the 15 km Rossing South trend yet to be drilled. Although Extract's priority remains resource definition and project development, exploration of this large mineralised system is expected to continue for some time."

Easily justifies a 15Mlb p.a. operation IMO - which is the key to NPV determination & financial negotiations. Also good to see this released in the middle of Q3, not at the end. Let's hope the DFS, due in Q4, is done in an equally timely fashion.


Audio interview & presentation by Jonathan Leslie on: http://www.brr.com.au/event/67730

Cheers,

Mark

Interesting to see the reasons Polo has set out in its circular for disposing of its stake in Extract:

At the time of the decision to enter into the Nippon Sale Agreement, the Directors unanimously resolved that the Tranche One Sale was in the best interests of Company and that the Proposed Sale, if approved by the Polo Shareholders, would also be in the best interests of the Company. In particular Polo Shareholders should note:

• The total consideration agreed to be paid to the Company in respect of its holding of 22,550,849 Extract Shares was AUS$157.9 million, equal to a price per Extract Share of AUS$7.00. The price of AUS$7.00 per Extract Share represents a 3.7 per cent. premium to the Closing Price of Extract Shares on the ASX on 8 July 2010, the date on which the Nippon Sale Agreement was entered into and a premium of 8.9 per cent. to the Closing Price of AUS$6.43 on 6 July 2010, the date on which the terms of the disposal were proposed to Polo, and recognised the strategic importance of the block of shares held by Polo. The Company has received no dividends or other distributions or income from the Extract Shares since the date of its investment.

• The recent significant fluctuations in the share price of Extract Resources on the ASX and the TSX illustrate how volatile the market for shares in companies can be and, while the Board remains confident about Extract Resources’ prospects, there can be no assurance that the price of Extract Shares will rise or in future reflect further progress, if any, made by Extract Resources.

• The disposal of Polo’s holding of Extract Shares as a block (rather than declaring a dividend in specie of those Extract Shares to Polo Shareholders) ensures the Company (and accordingly Polo Shareholders) receives full market value for its Extract Shares plus a premium. The Directors believe that if Polo’s holding of Extract Shares had been distributed pro rata to Polo Shareholders this could have had an adverse affect on the market value of Extract Resources as a key strategic stake was broken up.

Cheers,

Mark

Hi All

The UK-Analyst Stock Market Report for Friday 9th July 2010.
Brokers' Notes

Ambrian Capital maintained its "BUY" recommendation and 232p target price for Kalahari Minerals (KAH). The research house said that, for the mining and exploration company, upcoming share drivers fall into two broad categories. The first category is fundamental progress on Rossing South, which has been confirmed as the highest grade granite-hosted uranium deposit in Namibia. The second category is potential "game changers" through development, such as a joint venture with Rio Tinto, or a merger & acquisition. In both cases, Ambrian sees significant shareholder uplift; and thus remains very positive on the group's shares, which is currently at an 8% discount to its investment in Extract Resources. The shares moved up by 1.5p to 165p.

http://uk-analyst.com/shop/page-advice/action-advertorial.show/id-130006216

The 232p price target would equate to an EXT SP of ~A$10 at the current exchange rate, if the 8% discount remained.

Regards
Steve

Hi All

Just found these comments from Ambrian on Kalahari's website.
The final paragraph may put some of the happenings of late into context?

Regards
Steve


Extract Chairman's address – Zone 1 shaping up
22 June 2010

As part of the Extract Resources' Chairman's address, Extract has announced that it remains on track for a 3Q10 resource upgrade, but reiterated that this will focus on increasing the Zone 1 and 2 inferred resource to indicated categories to support feasibility studies (4Q10). Other key points were:


•work has commenced on site to extract a bulk sample from Zone 1;
•it is expected that a mining licence application will be submitted in 4Q10;
•confidential discussions with potential partners continue;
•in spite of recent media speculation, positive dialogue continues with the Namibian Government; and
•A$86.7m cash balance.

The key take-home from this news is that the company is aggressively focusing on the Zone 1 (and 2) area of the deposit. Whilst most juniors would chase headline resource increases, we think the ongoing focus on Zone 1 opens up the potential to sell or JV Zone 1 (probably to/with Rio Tinto). This would be an extremely smart move as it would potentially fund Zone 2 (and extensions) into production, with less (or even no) further dilution to Extract shareholders.

http://www.kalahari-minerals.com/News/Analyst_Research/Extract_Chairman%e2%80%99s_address_%e2%80%93_Zone_1_shaping_up_/News.aspx?id=211

So.... Polo have agreed to sell their stake and that of their associates to Itochu for a somewhat disappointing A$7/share.

Assuming a merger between Kalarahi proceeds on terms where, effectively Kalahari's shareholding in Extract is distributed to its shareholders, as I believe is likely, that would give Rio Tinto 19.4% of Extract and Itochu 16.0%. Alternatively, Kalahari could simply liquidate itself to achieve a similar effect.

It seems that Polo might be on the edge of disposing of their strategic stake[ref]See my notes from Kalahari's AGM http://www.stockopedia.com/content/kalahari-minerals-annual-general-meeting-notes-and-reflections-43869/ [/ref] : http://fool.uk-wire.com/cgi-bin/articles/201007021626157700O.html

Polo Resources Limited (AIM and TSX: POL) is pleased to announce that it is continuing its efforts to sell its shareholding in one of its portfolio assets. Subject to receipt of any shareholder approval which may be necessary for any such sale, completion of the sale and receipt of cash proceeds of sale, the board of Polo intends to utilise part of the proceeds of sale to fund a special dividend to shareholders of 3p per share.

The only "portfolio asset" it has previously indicated that it wishes to sell is its stake in Extract. Is Tom Albanese showing up in Namibia merely a coincidence? NB if Rio acquired Polo's stake it would be forced to launch a full-blown bid for Extract, because that stake would take it over the 20% threshold for a mandatory bid under ASX rules.

Mark

RNS just released by Polo http://www.investegate.co.uk/Article.aspx?...07021626157700O

Potential Special Dividend of 3 pence per share



Polo Resources Limited (AIM and TSX: POL) is pleased to announce that it is continuing its efforts to sell its shareholding in one of its portfolio assets. Subject to receipt of any shareholder approval which may be necessary for any such sale, completion of the sale and receipt of cash proceeds of sale, the board of Polo intends to utilise part of the proceeds of sale to fund a special dividend to shareholders of 3p per share.

IMO, the only asset they've got that would give them cash of 3p per share is EXT. Now, who are they selling to?

Xig

H/T to Gero for finding this: http://www.economist.com.na/index.php?option=com_content&view=article&id=21864:rio-tinto-ceo-punts-expansion&catid=571:headlines&Itemid=62

What makes the chief executive of the world’s biggest mining company come to Namibia in person to check on one of his minor subsidiaries? Short of saying he is here to work out a deal for Rössing Uranium to acquire other known uranium deposits, the CEO did say in typical CEO-speak that he is here to cement the relationship with government and to promote “concerted efforts for the sustenance of mining and processing of uranium in Namibia.”...

ISTM that Tom Albanese visiting Namibia may have some significance to Extract's future. ;0)

...and just in case anyone isn't aware, Extract have released more encouraging drilling results today: http://www.extractresources.com/DesktopModules/Bring2mind/DMX/Download.aspx?EntryId=3491&PortalId=13&DownloadMethod=attachment

2 July 2010:

 

Extract Resources Ltd (ASX/TSX/NSX: EXT), a uranium exploration and development company with projects in Namibia, today announced exceptional infill drilling assay results and the emergence of a new zone of uranium mineralisation at Rössing South, part of Extract’s world-class Husab Uranium Project.

Strong drilling rates continue to support the next resource update which will form the basis for completing the Rössing South Definitive Feasibility Study. The Company remains committed to the development of a mine at this globally significant project.

From that release, here is a momentous point in Extract's history:

This blast was carried out to obtain a bulk sample of ore for process testwork being conducted in Aus.

Finally, details of Extract shares purchases made by Kalahari over the last year have been released: http://www.extractresources.com/DesktopModules/Bring2mind/DMX/Download.aspx?EntryId=3492&PortalId=13&DownloadMethod=attachment

Analysing those, it appears that whenever Kalahari has any spare cash, it has been buying Extract shares. It now owns 99.8m shares, 41.06% of Extract's currently issued share capital. ASX "creep provisions" allow Kalahari to purchase up to 3% more in any size month period, without being compelled to make an offer for Extract.

Cheers,

Mark

Swakop Uranium Dismisses 'Loose Allegations'
Toivo Ndjebela
29 June 2010

Windhoek Swakop Uranium, the Namibian subsidiary of Australia's Extract Resources, has reacted angrily to reports that it has done little to develop its Husab uranium project and could lose it to Russian investors as a result of such poor progress.

The fate of the Husab project, which until recently was known as Rssing South, has been shrouded in mystery, especially after reports in Australia suggested that Namibian State-owned company, Epangelo Mining and Russian company, Atomredmetzoloto (ARMZ), were eying the Husab project.

Reports suggested that Epangelo and ARMZ were waiting in the wings and ready to pounce on the Husab project, because the government of Namibia was purportedly becoming impatient with the lack of progress being made on what is believed to be one of the country's largest uranium deposits.

Chairman of Extract Resources Namibia, Steve Galloway, on the occasion of Swakop Uranium's first blast at Husab on Thursday last week, said there were "misconceptions in Australia" regarding his company's priciest asset.

"We are very serious about this project and it is absolutely unfounded that there's no progress made at the site so far," he said.

Norman Green, Chief Executive Officer of Swakop Uranium, echoed his chairman's sentiments: "I've never seen a mining project developing so fast, like this one."

The envisaged mine held its first on-site blast on Thursday last week at an event attended by Mines and Energy Minister, Isak Katali, and other senior ministry officials, including Permanent Secretary, Joseph Iita, and Mining Commissioner Erasmus Shivolo.

A visit to the site shows a host of activities going on, with geologists hard at work, while drilling and crushing is also the order of the day.

There are four drilling contractors on site and, following last week's blast, management is confident that the mine is well on track to production, following the discovery of uranium potential in February 2008.

The company, which currently spends about N$30 million a month on activities at the site, is in search for long-term partners to co-finance the expenditures.

"The board faces the challenge of finding partners, who would co-fund the operations. We want long-term investors," Galloway said.

Epangelo recently confirmed to New Era that it is interested in acquiring a stake in the Husab project and the company would be happy to hear that on Thursday Galloway declared, "We would certainly look at their offer".

Galloway refused to implicitly comment on the pending proposal by neighbours, Rssing Uranium, in which the Rio Tinto-owned subsidiary has offered to build a conveyor belt for the further processing of Swakop's products in return for a stake in the Australian-controlled company.

"It's up to Rssing to prove to us whether there are synergies in putting up that conveyor belt, but we do not want to comment on the proposals of individual companies," he said.

Extract says it has received massive interest from bidders who want to invest in the project, and an advisor has been appointed to look at and assess all bids trickling in, to identify suitable partners.

http://allafrica.com/stories/201006290737.html

Extract allays fears on Rssing South uranium
by Desie Heita
29 June 2010

WINDHOEK Developers of Rssing South uranium mine have refuted speculations of uncertainty due to Namibia's signing of a multi-billion-dollar uranium investment deal with Russia.

The announcement comes at a time when Extract is preparing to submit a formal application for the mining licence by the end of this year.

Addressing shareholders at an annual general meeting last week, Extract's chairman, Stephen Galloway, said dialogue between Extract and the Namibian Government on the development of the mine continues without apprehension from either side.

"I should add that in spite of recent media speculation, I can confirm that dialogue between the Namibian Government, Namibian stakeholders and Extract Resources, remains open and positive," said Galloway.

Namibia signed an N$8-billion deal with Russia's State Atomic Energy Corporation (Rosatom) during President Hifikepunye Pohamba's visit to Moscow early this month.

It was also during this visit that a memorandum of agreement was signed involving intergovernmental agreements on peaceful nuclear energy and the possibility of Rosatom developing Rssing South uranium mine.

The agreements surprised many, especially since Extract is the majority shareholder of Rssing South uranium, with the Namibian Government having only expressed interest of becoming a minority shareholder.

Galloway said shareholders are committed to have Extract as the sole developer of the Rssing South uranium project, but this does not rule out the possibility of bringing in new partners.

"We continue to [] assess potential partnership opportunities that could deliver additional value to the development process. As part of this process, Extract remains in confidential discussions with potential partners. These discussions are ongoing," said Galloway.

Current estimates are that the mine would produce about 6 800 tonnes (about 15 million pounds) of uranium oxide per year, which Galloway said, puts Extract in a unique and privileged position, as the mine would be one of the largest stand-alone mines in the world.

Work is already on schedule to complete an environmental impact assessment and management plan, in parallel with preparations for the mining licence application.

"Together with the definitive feasibility study, the outcomes from this work will be used to support a mining licence application over Rssing South before the end of 2010. This is an extremely positive position for the company and underpins the hard work by the management team to achieve our objectives," said Galloway.

The company has already put in place an executive team, led by Norman Green, the person who brought Skorpion Zinc Mine on stream.

http://www.newera.com.na/article.php?articleid=11702

Extract has released a new AV presentation by Jonathan Leslie: http://www.brr.com.au/event/66512

Regards,

Mark

H/T to "ashem" on another site for highlighting this: http://www.proactiveinvestors.com.au/companies/news/8084/kalahari-confident-extract-resources-will-secure-project-finance-for-rssing-south-8084.html

Kalahari confident Extract Resources will secure project finance for Rössing South

by Karl Loomes

Coming away from a meeting with Mark Hohnen, Executive Chairman of Kalahari Minerals (LON:KAH), one can’t help feel optimistic about the company’s outlook over the next twelve months.

The prospects for Extract Resources’ (TSX:EXT, ASX:EXT) - whom Kalahari own a 40.9% stake in – Rössing South continue to look better by the day.  The next expected resource update in September, with both the size and grade of the deposit expected to increase, will solidify the project as the largest undeveloped uranium deposit in the world...

Mark

EXT Chairman's statement issued overnight following the EGM, much of which has been reported before, though in light of recent claims by RosAtom, I'd highlight this section:

Extract is proud to have a strong relationship with the Namibian government and its relevant organisations, each of which continue to be supportive of our development plans and our initiatives at all levels.

There is open and regular dialogue between Extract and the Namibian government, including at the highest level, ensuring that the Namibian authorities remain abreast of all of Extract's developments.  This includes regular updates regarding the Definitive Feasibility Study.

http://www.extractresources.com/Default.aspx?TabId=631&DMXModule=1420&EntryId=3487

SM

Brief project update out last night: http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01072251

Nothing particularly significant that I spotted, other than participation in NamWater JV with other U miners to build another desalination plant. JORC update and DFS broadly on-track for Q3 and Q4 respectively.

Cheers,

Mark

Hi All

Latest WH Ireland (07/06/10) Broker Note for Extract.

Regards

Steve


Extract Resources Limited

Buy
Price A$6.65
Target Price A$8.02
3-year Target A$12.37

Evident Scalability still Not Understood by the Investor

-Current 3-year target of A$12.37 ps
-Raised average Resource grade by 25% to 600ppm
-Lowered our LT U3O8 price 8% to US$55/lb
-Raised operating costs by 11% as a result of increased stripping ratios
-Additional US$25m in capex for pre-strip
-50% increase in production would result in a 3-year target of A$17.73 ps

As mentioned in the recent EXT quarterly, approximately 72km of both RC and diamond drilling went towards infill, extensional and sterilisation of Zones 1 & 2. There are now 19 drill rigs on site and we applaud management for its diligence in converting much of its Indicated to Inferred and Measured categories for the Definitive Feasibility Study (DFS), currently scheduled for completion in the 4Q10. However, it has become apparent that, as a result of recent diamond drilling, an over-reliance on the cheaper RC technique under-estimated the insitu grade by at least 23%. RC drilling, by its very nature, breaks up the rock into small rock fragments and dust, which is not considered a statistical issue when drilling a heavy element such as gold. But in an alaskite (the host rock), composed primarily of quartz (20 to 60% by volume), with the difference composed of alkali-feldspar, primary uranium mineralisation as uraninite appears to be highly susceptible to aerosol loss. If confirmed officially, it will be interesting to see how the
company will accommodate this issue in future resource calculations.

We also updated our assumptions. For instance, the arbitrage between the spot price and the long-term U3O8 price has increased by 7% over the past seven months to 42%. Even taking into account the relative liquidity of the market, it is too high given both carrying costs and commodity price spreads. We therefore hypothesise that the long-term price will decline from current levels (US$58/lb), lowering our LT price assumption to US$55/lb U3O8. As flagged in our previous note, we fully incorporated additional costs from the previously announced higher stripping ratios, coupled with slightly higher capex. Although our cost per tonne is no-longer within company guidance (~+11%) as released with the pre-feasibility study (~A$23.9/t), we await the DFS release, due in 4Q10, before we will review our figures.

We understand that the company is evaluating the option of building a 6km conveyor belt from Zone 2 to the existing Rossing mill, coupled with the development of their own processing plant. We believe that a toll-treatment option is clearly a sub-optimal outcome for all EXT's shareholders, with the exception of Rio Tinto, especially when compared with the opportunity of increasing capacity throughput to capture additional economies of scale and possibility of bringing additional cashflows earlier. For example, assuming a 50% increase in capacity, additional capex of US$200m coupled with scalar increases in opex and repayments, etc., the three year price target would increase to A$17.73 per share. If we increased productive capacity by 100%, additional capex of US$350m, the three year target would increase to A$23.25 per share. Although there is a risk that the project could inundate the primary market with supply, it is clear evidence that management should retain full control of this project.

Despite our three year target declining by 11%, we believe that investors have yet to appreciate the significance of the Rossing South Discovery and the ability of it to add to shareholders wealth. Our financial model is currently constrained by pre-feasibility output guidance. However, we believe that future optimisation studies will recommend greater production levels than currently anticipated, coupled with the prospect of mining higher-grade
portions of the ore-body to facilitate faster payback. We think this company to be very good value for a risk tolerant investor with a 5-year time frame.

Full Report
http://www.capmarkets.com/ViewFile.asp?ID1=138173&ID2=420391633&ssid=1&directory=12494&bm=0&filename=EXT_WHI_070610.pdf

Finally catching up with processing Extract's recent drilling results. The following image shows the location of new holes, data for which was released in April.

Locations marked in yellow represent infill drilling and green represents extensional drilling. As can be seen most of the April results were infill, necessary to provide sufficient confidence for the definitive feasibility study, so may not have added much to the resource. On to the recently published May results, which might be rather more interesting... ;0)

Regards,

Mark

AFR MarketWrap 5PM 20/05/2010

Extract set to glow a lot brighter.

Uranium miner Extract Resources is either a very disappointing stock or the analysts who cover it are very clever, or maybe both hold true.

Despite its most favourable aspect, in a local context, that it holds assets outside Australia and has managed to avoid the recent tax-related selling, the company's share price has been on the way down since last year.

The stock has spent the best part of the past seven months trading between $7 and $9, but analysts have kept faith all the way. The consensus analysts' target price has been sitting at an average $3 premium to the share price.

Brokers expect the price to hit $10.93 over the next 12 months.

But investors know that investing in uranium stocks is a long-term strategy based on the energy demand exploding. Extract Resources aims to develop its Rossing South project to reach production by the end of 2013 with a base rate production of 15 million pounds a year. Of the brokers that cover the stock, there are six "buy recommendations and one "hold", but no sells.

Extract shares are down 16 per cent year to date, underperforming both the S&P/ASX 200 Resources index and rival Paladin Energy, which have shed 13 and 7.7 per cent respectively.

http://www.afr.com/p/markets/market_wrap/extract_set_to_glow_lot_brighter_MqfMjMcIsHsjbd6Ozy5xsK

A 3 minute audio interview with Extract's CEO, Jonathan Leslie has been published today, here: http://www.brr.com.au/event/65911

Nothing particularly new in it.

Cheers,

Mark

W&G,

FWIW, I tend to agree - and once the shareholder register is cleaned up Extract could become relatively takeover-proof, with all its major shareholders having a strong vested interest in retaining their interest in the company.

However, we may have some way to go before this process of reallocating shareholdings from financial investors to miners & consumers is complete. Firstly, APAC is a much smaller business than Itochu. I am not sure that it has the financial muscle to retain its interest through to mine construction. Its ownership could be a stepping stone in a transfer to stronger Chinese hands.

As you say, the disposal (or not!) of Polo's stake will be the key short-term event. Where it goes will likely determine Extract's ultimate shareholder structure. The price it goes for will show what value the industry market (as opposed to the stock market) puts on Rossing South, in its current state. If, OTOH, Polo do NOT dispose of their stake within the next few weeks, I would take that to mean that Polo believe that they can obtain a better price by holding on a little longer - which is also a useful indicator for shareholders, if you trust Polo's judgement.

Bringing the Caledon paper offer into the open takes the time pressure off Polo for disposing of the Extract stake. I suspect that Polo's preference would have been to dispose of their Extract stake first, so that the company was demonstrably cash-rich - but that buyers of the Extract stake are dragging their feet. That's another motivating factor for maximising the pace of drilling: to prove the worth of Rossing South to buyers.

Also worth noting that Friday's confirmation of Niger Uranium Ltd (LON:URU) 's distribution of 10.9m Kalahari shares will be another step in the shareholder redistribution process.

Regards,

Mark

In my mind the sales to itochu and apac (and i would imagine others will come forward too) are the outcome of extract's review of offers in march. i'm guessing it was decided that it was a way of simplifying the share register and of allowing dattels a way out at a reasonable price. once done you can merge the two companies and you've got all the big boys who can then in part equity fund the mine and pay to get into long-term off-take agreements.

My (complete) guess is that there are 19 rigs drilling like mad because everyone wants to know how much the agreements are going to cost not because they're still looking for a takeover. Although until polo sell it remains a possibility.

All the best in this and all others in these tricky markets!

W&G

Major strategic investment secured from APAC Resources

Under the terms of the agreement between Coronet Resources Limited (`Coronet')
Kalahari and APAC (`the Agreement'), Kalahari's wholly owned subsidiary Coronet
has agreed to sell up to 16,000,000 ordinary shares in Kalahari (`the Share(s)
') at a price of £1.85 in cash per Share, equating to £29,600,000.00 (assuming
all the Shares are purchased).

The Company intends to use the proceeds from the sale of the Shares for general
working capital purposes.

Kalahari's Executive Chairman, Mark Hohnen, said, "I am delighted to welcome
APAC to our shareholder register, as this gives further support to our already
strong institutional backing. APAC has a venerable track record in the natural
resource sector, with its CEO, Andrew Ferguson, bringing a wealth of experience
of the London mining arena from his six years as co-fund manager at City
Natural Resources High Yield Trust. Of equal importance are APAC's invaluable
relationships and contacts in the Chinese commodities market, which further
strengthens Kalahari's exposure to the Asian resource sector following the
strategic shareholding taken in Kalahari by ITOCHU Corporation in March 2010.

I'm not surprised by this in view of Kalahari's not cancelling the shares acquired during the Coronet takeover. I assume that by doing this, it ensures Kalhari's near-time cash reserves and further marginalises RIO.

I admit to hoping that KAH and EXT merge at some point this year.

Chris

With thanks to Gero, nice interview yesterday in the "Namibia Economist" with Extract's explo manager, Martin Spivey: http://www.economist.com.na/index.php?option=com_content&view=article&id=21463:roessing-south-moving-forward&catid=578:general-news&Itemid=60

...According to Spivey: “It is a source of pride for me that we have achieved something really special that will add hugely to the Namibian economy and provide many thousands of jobs and other benefits for Namibians over many years.”...

 

Cheers,

Mark

Activity & cashflow reports have been released for Q1 2010 (Q3 of Extract's FY). Very encouraging results from hand-held spectrometer readings on samples from the western limb of the Rossing South antiform are reported in the activity report. Chemical assay results are awaited before these are reported formally. This gives confidence in hitting the 185-285Mlb conceptual exploration target, in addition to the currently declared resource. See the activity report for details and several diagrams illustrating findings.

Regards,

Mark

Itochu director appointed at Kalahari, as previously agreed: http://fool.uk-wire.com/cgi-bin/articles/20100423145552P1166.html

...Kalahari's Executive Chairman, Mark Hohnen, said, "I would like to welcome Mr.
Takashi Yasuda to the Board and look forward to working closely with him. We
believe that the experience of ITOCHU in the uranium sector and in Namibia, as
well as the political and financial backing it receives from the Japanese
Government, will be highly beneficial to our active strategy with regards to
the development of Extract Resources and its Rössing South mine. The project is
targeted to be in production by 2013 and both parties are fully committed to
being active participants, with the intention being to ensure that Extract
receives all the relevant support to ensure that development at the world-class
Rössing South uranium project is fast tracked and its full potential realised
for the benefit of all shareholders."

The agreement between the two parties entitles ITOCHU to maintain a nominated
ITOCHU representative on the Board, as a non-executive director, conditional
upon ITOCHU (or any member of its group) being interested (either conditionally
or unconditionally) in at least 13.5% of the entire issued share capital of the
Company (`the Agreement').

The Agreement further provides that should ITOCHU's shareholding be diluted by
a further issue of shares on a non pre-emptive basis, in which ITOCHU had not
been invited to participate, its right to appoint a non-executive director will
be upheld. However, in the event that ITOCHU's shareholding is reduced to below
10% of the entire issued share capital of Kalahari for a continuous period of
more than 15 days, the Agreement will terminate with immediate effect...

Cheers,

Mark

...and thanks to fordtin elsewhere for highlighting the following:

Included in Rio Tinto quarterly operations report:

At Rössing, Namibia, detailed mapping and sampling was completed over the Z20 uranium target in preparation for drilling. This target, which lies on the existing Rössing mine lease, is the likely extension of the Rössing South Zone 1 currently being evaluated by Extract Resources Ltd."

I think this reinforces the view that Rio are pretty desperate to improve their resource base at Rossing. I also suspect they'll struggle to find much there. That's because zone 1 dips from north to south, so ore to the north of zone 1 is likely to have been above the current surface level and will probably have been weathered away. It is possible, however, that deformation of the earth's crust could cause the ore body to dip down again in Rio's licence.

...and from Minesite:

April 19, 2010

Kalahari Minerals Trumps Rio Tinto At Rossing South By Bringing In Japanese Sovereign Interests

By Charles Wyatt

 

...Mark Hohnen, executive chairman of Kalahari, believes Extract has the ground and potential to deliver a total resource of around 550 million lbs U3O8, which would make it the biggest uranium-only deposit in the world, and with excellent grades too. Rossing South alone has the potential to produce 15 million lbs U3O8 per year, and that would make Extract a Top Five global producer.

For a long time the betting has been that Rio Tinto, which has modest shareholdings in each company,  making a bid for one or both of them. Rio’s recent quarterly results demonstrate that the pressure on Rio to make a move is rising. Lower grades hit production during the first quarter of this year at both ERA and Rossing, which resulted in a 20 per cent fall in production compared with the same period last year. At the same time, good exploration progress was reported at the Z20 prospect which is a strike extension from Rossing South.

At the beginning of 2009 we gave an insight into the politics being played by Rio Tinto in an effort to get its way on the cheap, but Mark played a blinder, and Rio Tinto had to ditch the devious tactics. In fact they were a waste of time and, crucially, did nothing to improve relations between the companies...

 

...Unfortunately for Rio Tinto, things have changed significantly as far as its two targets are concerned and it no longer has the stage to itself. For a start Jonathan Leslie has been appointed chief executive of Extract and Chris McFadden, a nominee of Rio Tinto, has resigned. This is in line with an agreement reached at the Extract AGM last November that he would go when a new chief executive was appointed. As Mark Hohnen points out, “Jonathan has an exceptional level of experience in the uranium sector, particularly in Namibia, where he was managing director of Rossing Uranium, Rio Tinto’s subsidiary, which operates the producing Rossing Mine. He is an international expert in the uranium industry and a well-respected figure in Namibia, with outstanding relationships with the Namibian government and mining agencies. He joins at a crucial time, as the Rossing South project is in course of transforming itself from a pure exploration play to a tier one uranium production company.”...

This is a controversial viewpoint that many private investors in Extract will object to (having a less rosy view of Mark Hohnen's role). However, I keep an open mind and concur with Charles Wyatt's concluding sentence:

A fascinating situation and one that will enthral investors for some time to come.

..though how much longer it wil take before something decisive happens remains a very open question.

The key, at present, is the disposition of Polo's stake.

Regards,

Mark

With thanks to Ugly on another BB

London-listed Kalahari Minerals Plc has flatly rejected proposals by Rio Tinto-owned Rossing Uranium to jointly develop the world class Rossing South (Husab Uranium) uranium deposit, The Southern Times has established.

IMO, Kalahari and Extract will merge with a full listing on the LSE (and subject to the LSE Takeover code - thus preventing RIO from acquiring more than 30% without a takeover offer). I also feel that this merged company will mine Husab and be in the FTSE100 within 2 years from today.

Chris

Hi All

With thanks to prhb on HC for drawing my attention to the following articles.

It had been wondering, as had prhb on HC, what effect, the following may have on the future of uranium pricing.

Nuclear Summit Changes Uranium Outlook
14/04/2010 1:15:03 PM
By Rudi Filapek-Vandyck

http://money.ninemsn.com.au/article.aspx?id=1039587

QUOTE

"US President Obama's success in convincing world leaders the best way forward is through the conversion of hundreds of thousands of tons of weapons-usable nuclear fuel into non-military fuel for power stations might be good news for world peace, but probably not so for investors in uranium companies.

This week's nuclear summit in Washington has ended with a general pledge by participants from all over the globe to convert hundreds of thousands of tons of weapons-usable nuclear fuel by 2014, plus an intention to set a 2012 summit in South Korea to measure progress."

The first thing I would like to point out is I think the reporter, Rudi Filapek-Vandyck, has his tons of uranium confused with lbs, as I will show later?

I agree this will have an effect on Uranium pricing in the short term.

However, if the uranium price stays at around US$40lb on the spot market and around US$60lb for the long term contracts, it will mean that EXT will be one of the few mines that will still be profitable at these prices levels.

Many mines that are currently expected to go into production, and even upgrades to production proposed by some current miners, may not happen, as they will not be viable at these pricing levels.

This would mean that whenever the uranium price starts to recover, due to supply and demanded constraints, EXT will be in a position to capitalise on the situation, buy ramping up production.

Military Warheads as a Source of Nuclear Fuel
World Nuclear Assosiation, October 2009
http://www.world-nuclear.org/info/inf13.html

QUOTE

"For more than three decades concern has centred on the possibility that uranium intended for commercial nuclear power might be diverted for use in weapons. Today, however, attention is focused on the role of military uranium as a major source of fuel for commercial nuclear power.Since 1987 the United States and countries of the former USSR have signed a series of disarmament treaties to reduce the nuclear arsenals by about 80%.

Nuclear materials declared surplus to military requirements by the USA and Russia are now being converted into fuel for commercial nuclear reactors. The main material is highly enriched uranium (HEU), containing at least 20% uranium-235 (U-235) and usually about 90% U-235. HEU can be blended down with uranium containing low levels of U-235 to produce low enriched uranium (LEU), typically less than 5% U-235, fuel for power reactors. It is blended with depleted uranium (mostly U-238), natural uranium (0.7% U-235), or partially-enriched uranium.

Highly-enriched uranium in US and Russian weapons and other military stockpiles amounts to about 2000 tonnes, equivalent to about twelve times annual world mine production.

World stockpiles of weapons-grade plutonium are reported to be some 260 tonnes, which if used in mixed oxide fuel in conventional reactors would be equivalent to a little over one year's world uranium production. Military plutonium can blended with uranium oxide to form mixed oxide (MOX) fuel.

After LEU or MOX is burned in power reactors, the spent fuel is not suitable for weapons manufacture."

As mentioned ealier I think the reporter in the first article was confusing tons of uranium with lbs.

If the total weapons and other military stockpiles amounts to about 2000 tonnes it would equate to only ~4mlbs in total.

Utility companies, China and other sovereign nations are looking for security of supply over the next 50+ years.

They can not afford to rely on a supply of uranium, converted for civil purposed from weapons grade from the USA, Russia and others, that may or may note eventuate.

As EXT will be able to offer customer a constant supply of uranium for at least the next 40-50 years, I feel sure they would be happy to pay a premium to the current long term price, to insure security of supply.

It may also be the catalyst for a takeover offer being made for EXT, taking advantage of the current depressed uranium pricing.

The offer may not be as high as it may have been 6 months ago, but I would still expect around US$3B, to secure one of worlds largest and most cost effective uranium deposits.

Regards

Steve

Just noticed that Rössing Uranium (68% owned by Rio Tinto, operator of the Rössing mine), released their 2009 report on April 9th, accompanied by a press launch. From the press release:

Moving forward, the mine’s expansion programme requires significant financial investments in its future. These would involve costly waste rock stripping to expose the uranium bearing ore and to acquire new heavy mining equipment for the open pit. Another ongoing expansion activity is the mine’s heap leaching pilot plant.

During the year under review the volatility of the uranium price continued, cycling between a high of US$53 per pound in January and a low of US$42 per pound of uranium oxide in September, as the effects of the world financial crisis continued.

"However, the long-term outlook for the mine remains bright."

"Our expansion investment requires an increase in manpower, but skills shortage continued to be one of the main challenges faced by the mining industry in Namibia, especially in light of increased competition from other uranium operations in the Erongo Region," quoted Mutumba from the report.

We continue to focus sharply on equipping our existing staff with various skills and offering them leadership training. We have also invested extensively in our potential future workforce, supporting 130 bursary apprentices and 60 university students in 2009.

....making the case for sharing of resources. ;0)

From p3 of the report:

 

2010 Rössing Uranium’s strategic objectives

Expanded key drivers:

Growth and innovation:

• Improvement projects

• Rössing South 

I also note from Mike Leech's introduction (Rössing Uranium MD):

As always, but particularly now, volume and cost efficiency are the main levers we use to maintain our profitability. For this reason we have initiated a significant improvement programme that seeks to lift volumes and save costs wherever practical.

We have also reduced capital spend to the essential health, safety and environment projects and those with high returns, and we are focusing on completing projects a bit more slowly but primarily with our own resources.

Not a lot of point spending a lot of CAPEX on the old Rössing mine, if they might be about to gain access to some substantial higher grade and cheaper to extract & process resources?

Methinks Rössing Uranium are itching to get their hands on Rössing South ore, if they can.

Cheers,

Mark

New director and CFO appointed at Extract:

• Ron Chamberlain, formerly acting CFO, appointed a a director. Also formerly CFO for Paladin Energy Ltd. 
• Peter Sydney-Smith appointed as Extract CFO. Formerly FD of Mwana Africa (LON:MWA) , Nikanor (where, I guess, he would have met Jonathan Leslie), Vedanta Resources (LON:VED) and BPB Plc.

These seem like solid and serious appointments.

Regards,

Mark

Per this announcement it appears that Itochu are not prpeared to settle at 15% of Kalahari (though they have previously stated that they do not intend to make a hostile bid, barring a change in circumstances).

Itochu have entered into a conditional agreement to acquire a further 2.1m Kalahari shares, taking their holding to 16.7%.

I'm a liitle surprised that the SP reaction hasn't been stronger, as we clearly have a buyer in the market and I find it hard to believe that Itochu would be so keen on acquiring Kalahari shares unless they were confident that a merger between Kalahari & Extract was on the cards, as Mark Hohnen has stated. Kalahari still trades at a 24% discount to the net value of it's tangible assets (mainly Extract shares). That discount would disappear if a merger took place and Kalahari shares were replaced by Extract shares equivalent to those represented by Kalahari's holding.

Regards,

Mark

A marriage of two Rössings on the cards?
By: JO-MARÉ DUDDY

THE top brass of Extract Resources, owners of Rössing South, is meeting with President Hifikepunye Pohamba this afternoon to brief him on plans to develop the uranium deposit into one of the biggest uranium mines in the world.

Mark Hohnen, Executive Chairman of Kalahari Minerals, which has 40 per cent shares in Extract, confirmed the meeting yesterday.
They will use the opportunity to introduce Extract's new Executive Director, Jonathan Leslie, and "to provide a progress report on the Rössing South project, as it enters this transformational period in its development – transforming from a pure exploration company to a one tier uranium production company," Hohnen said in statement on the Kalahari website.

Leslie's appointment adds fuel to persistent rumours of a marriage between Rio Tinto's Rössing Uranium and Extract's Rössing South. Leslie was a former managing director at Rössing Uranium.

Last week Rössing Uranium spokesperson Jerome Mutumba said his company has suggested a joint venture with Rössing South.
Mutumba said Rössing Uranium has proposed to transport ore from Rössing South to Rössing Uranium to be processed.
"Rössing South is only seven kilometres from the Rössing pit, and the mines could share significant infrastructure.
We see potential for Rössing South and Rössing working together on a joint development, as this will provide value to both Rössing and Extract Resources," he said.

Rio Tinto already has 15 per cent shares in Rössing South. However, it also holds 14 per cent of the shares in Kalahari Minerals, and therefore effectively owns 21 per cent in Rössing South.

A Consortium of Korean companies led by Korea Electric Power Corp (Kepco) is also keen to get their hands on shares in Rössing South. State-run utility Kepco, Korea Hydro and Nuclear Power Co, and Korea Resources Corp are looking to take a stake of around 15 per cent in Rössing South, Dow Jones Newswires recently reported.

Extract's wholly-owned subsidiary Swakop Uranium plans to have Rössing South in production by the end of 2013.
It can be ramped up to full production within 18 months after that, Swakop Uranium Chief Executive Officer Norman Green said.
The mine has the potential to produce 15 million pounds of uranium oxide a year, making it one of the three biggest uranium mines in the world.

– Additional reporting by Nampa

http://www.namibian.com.na/news/marketplace/full-story/archive/2010/april/article/a-marriage-of-two-roessings-on-the-cards/

Extract and Kalahari announce that, as expected, Jonathan Leslie has been appointed to Extract's Board and Rio's Chris McFadden steps down. Interesting comment from Mark Hohnen:

Kalahari's Executive Chairman, Mark Hohnen, said, "Extract is reaching a
critical stage in its development as it approaches the completion of a
definitive feasibility study at Rössing South and advances towards production.
We are therefore fully supportive of the appointment of Jonathan Leslie,
Extract's current CEO, to the Extract Board, who we believe has the ability to
take Extract to the next stage in its rapid development, building the business
and delivering a world class producing mine at Rössing South.

"As stated previously, Jonathan has an exceptional level of experience in the
uranium sector, particularly in Namibia, where he was Managing Director of
Rössing Uranium, Rio Tinto's subsidiary, which operates the producing Rössing
Mine. He is an international expert in the uranium industry and a
well-respected figure in Namibia, with outstanding relationships with the
Namibian government and mining agencies. Indeed, we are scheduled to meet with
the President of Namibia tomorrow, to introduce Jonathan and to provide a
progress report on the Rössing South Project, as it enters this
transformational period in its development - transforming from a pure
exploration company to a tier one uranium production company.

[my bold]

Regards,

Mark

Extract has posted a brief audio interview with Andrew Penkethman (projects) about the latest drilling results: http://www.brr.com.au/event/65185/extract-announce-exceptional-assays-at-rossing-south-andrew-penkethman-manager-projects?popup=true&wl=146

My notes on it:

• Two more rigs on their way to site, bringing total rigs deployed to 19
• 28,000m drilling completed in March
• Pilot process work in Perth is aimed to "continue to drop down our operating costs" - suggests that Extract is hoping to beat the US$23.60/lb preliminary OPEX estimate made last August

Cheers,

Mark

Why would Polo want to sell out of EXT now?

It seems to me that sometime between now and when Peter Mc was forced out, just over 6mths ago, the objectives of Kalahari and Polo have become no longer aligned.

The reason Peter Mc was forced out was that he wanted to go mining, preferable in a JV with Rio and KAH, Dattels and Co wanted to put up the for sale sign for a quick return.

Since then however, the scale and size of the resource has become clearer, being far greater than all, but some of the most optimistic poster on this BB, could ever have imagined.

Although I still don't think either KAH or Dattels are interested in taking EXT into production themselves, it does seem that KAH has more patience and is willing to wait longer to secure a greater return.

Waiting another 6 to 9 month would allow EXT time to increase the resource size to at least 600Mmlb, have done enough exploration outside Zones 1 and 2 to show the high probability of a further +400Mlbs and complete a DFS that will show that EXT will be one of the most, if not the most, cost effective and profitable uranium mine in the world.

Polo has stated that they want to focus on coal, they already own +30% stakes in both GCM Resources and Caledon Resources.

Polo have already made an unsuccessful takeover attempt for Caledon back in mid 2008.

IMHO Polo was counting on a quick sale of EXT to fund another takeover attempt for Caledon.

In early December last year Caledon's SP dropped to 35p, from around 60p, after the company abandoned attempts to find a buyer.

However since then coal prices, especially the coking coal that Caledon produces, has started to skyrocket. Price have almost doubled from US$120 to $200 p/t and there is speculation that the price could reach US$300 p/t before the end of the year.

Coal companies have again become flavor of the month, with a lot of M&A activity in the industry.

GCM has risen almost 5 fold since December form 50p to over 220p.

Caledon however has only just started to get notice again, with the SP only now starting to head back to 60p.

Hence Polo's dilemma. Do they go along with KAH and wait another 6-9mths in hope of securing a higher price and possibly miss out on a second chance at making a successful takeover bid for Caledon. Or, do they seek out a buyer for their EXT stake, even if at a discounted price, in hope of making more profit from a successful takeover bid for Caledon.

ISTM that Polo has decided it can't wait any longer and is prepared to do a deal for its EXT stake.

In the short term the effect this has on EXT's SP will greatly depend on the price Polo finally achieves for its EXT stake, as I discussed in an earlier post. However it should give us a floor price for EXT to trade around in the short term.

I still believe that by the end of the year EXT's SP will be far great than it is today, once the jorc update and DFS have been released.

FWIW I believe around A$12.50 without a takeover and between A$15-20 with a takeover.

Only time will tell if Dattels has made the right call.

Regards

Steve

Resignation of Director from Extract Resources


TIDMPOL

RNS Number : 8779J
Polo Resources Limited
08 April 2010

?
8 April 2010



Polo Resources Limited
("Polo" or the "Company")

Resignation of Polo Director from Extract Resources Board


Polo Resources, the AIM and TSX ("POL") listed mining company with coal and
uranium interests in Africa, Australia and Asia, announced today that its
Executive Chairman, Stephen Dattels, has advised Polo that he has resigned as a
non-executive director of Extract Resources Limited ("Extract"), effective
immediately. Polo has a strategic shareholding in Extract.

Stephen Dattels, Executive Chairman of Polo, said:

"While I have served on the Extract Board, Extract has made significant progress
in identifying the potential of its Rossing South asset as one of the leading
development uranium projects in the world today. Polo is a major investor in,
and supporter of, Extract."

"However, for its own reasons, Polo has previously announced the evaluation of a
range of strategic options to enhance shareholder value with respect to its
shareholding in Extract."

"Extract commenced its own review of strategic options in May 2009."

"In view of all these developments, and the demands of my other commitments,
including in particular as Executive Director of Polo, I have decided to resign
from the Board of Extract."

"I would like to take the opportunity to congratulate the other members of the
Board of Extract, and its management team and employees, on their success in
recent times, and wish them well for what I expect will be a successful future."


- Ends -


http://www.advfn.com/p.php?pid=nmona&article=42294504&epic=L^POL

Some broker comment this morning:

0856 GMT [Dow Jones] The potential to combine Kalahari Minerals (KAH.LN) and Extract Resources (EXT.AU) is a "price driver," Ambrian says. A move for the miner, in which Kalahari owns 40.4%, is a stated 2010 goal for CEO Mark Hohnen. "Kalahari currently trades at a 22% discount to its investment in Extract" but "we expect share price progress to be slow as the register matures from quick-return small-cap holders to larger, longer timeframe holders," Ambrian adds. New drill results from Extract's Rossing South mine are positive and "the company remains on track for a 3Q 2010 resource upgrade." Ambrian maintains a buy recommendation and 232p target price for Kalahari.

 

Reiterates that a merger between Kalahari & Extract is on the cards this year - thus eliminating the discount that Kalahari trades at. Whilst not mentioned in this comment, ISTR that Hohnen also indicated that once the companies merged, Extract would be fully-listed in London (as befits a £1bn+ company), rather than just on AIM.

Kalahari's own RNS on the Extract announcement makes this comment:

Kalahari Executive Chairman Mark Hohnen said, "These are again truly fantastic
results. Both Zones 1 and 2 of Rössing South continue to deliver exceptionally
wide uranium intercepts in excess of 1,000ppm, with highlights of 22m @
1,410ppm from Zone 1, and 41m @ 1,222ppm from Zone 2, further confirming the
global significance of the Husab Uranium Project. Importantly, the results
continue to support the view that these zones are continuous at depth, and
open, which should be significant with respect to the resource update scheduled
for Q3 2010.

"Significantly, the resumption of exploration drilling has met with immediate
success on the Western Limb of the Rössing South anticline, which is believed
to have the potential for yet more zones of mineralisation, further increasing
the scale of the project area. The proximity of the Western Limb to the
existing zones 1, 2 and 3 should allow for any resources and reserves defined
at these new prospects to be included in any future mine development.

"The initiation of design of the pilot plant testwork programme marks an
important step towards completion of the definitive feasibility study scheduled
for later this year, where preliminary cost estimates have already indicated
Rössing South can support production of at least 14.8Mlbs U3O8 per year. With
17 rigs currently operating and more rigs due to join the programme soon, we
believe Rössing South is one of the largest drilling programmes currently being
undertaken anywhere in Africa and is testimony to the magnitude and importance
of the Husab Uranium Project as a whole."

The bad news (for the short-term SP outlook, anyway), is that the U price is struggling to lift off the US$40/lb level. OTOH this means that many smaller competitors will be unable to raise finance & get their projects off the ground. According to figures from Drag on another site, Cigar Lake is totally uneconomic at that level.

Cheers,

Mark

Cheers Mark,

From your posts here and elsewhere, I suspect you're right about Polo and their need for approx £80m ;-)

Update from Extract

Rossing South Exceptional Chemical Assay Results Continue

Good to see 5 rigs back on exploration and not infill drilling

Chris

Japan snares Extract stake

By Kate Emery
The West Australian - Page72 – Saturday April 3, 2008

Corporate speculation about Extract Resources has reignited after one of the world's biggest trading houses, Japan's Itochu Corp, secured a foothold in the uranium hopeful.

The move raises the possibility of a new player in the battle for control of Extract as it approaches a self-imposed deadline for would-be partners to show their hands.

Through three separate deals, Itochu has become the single biggest shareholder in Kalahari Minerals, whose biggest asset is its 40 per cent of Extract. Itochu's stake in Kalahari equates to about 6 per cent of Extract.

Extract has long been regarded as a takeover target because it owns one of the world's biggest undeveloped uranium deposits, Rossing South, in Namibia.

Last month, Korea Electric Power was reported to be considering a joint bid for the group with state-run Korea Resources Corp.

Rio Tinto, which owns the Rossing mine just 6km from Extract's deposit, is considered another possible suitor.

Since the group picked up stakes in both Extract and Kalahari in September 2008, Extract shares have risen 580 per cent.

However, Extract's decision to appoint former Rio director Jonathan Leslie as chief executive last month has some analysts suggesting a joint venture with the mining giant is more likely.

Extract has tapped corporate advisers Rothschild to assess various options for Rossing South.

As part of that process it has called for potential development partners to submit their proposals by early this month.

A feasibility study will follow in mid-2010 and the group hopes to take another step towards its resource target of 500 million pounds of uranium with an upgrade in the third quarter.

It has already found just under 300mlbs.

Itochu, which also has a stake in WA's Lake Maitland uranium project, picked up its 15 per cent Kalahari stake through separate deals with Kalahari and two of its shareholders, Emergent Metals and Regent Pacific.

Emergent and Regent are chaired by Canadian uranium entrepreneur Stephen Dattels, who also chairs Polo Resources and has a seat on the Extract board. Polo Resources has a 9 per cent stake in Extract.

The deals were done through Itochu's Australian subsidiary, Nippon Uranium Resources.

Itochu said it regarded Rossing South as one of the biggest uranium prospects in the world, and that it would receive full support from the Japanese Government.

Extract last traded up 16c at $7.90, well below its $11.45 peak in September last year.

Would PRL purchase of GCM be possible, privileged information and all that.

Hi xigris,

I think the stake in EXT is amongst the 'liquid current assets' part of the $15m post-dividend NAV, with Tsumeb being the 'major mining asset' referred to in Investment Policy going forward.

And Polo commences dual trading on the TSX today and becomes ISA-able:

Polo dual lists on the Toronto Stock Exchange

Polo Resources, the mining company with coal and uranium interests in Africa, Australia and Asia, is pleased to announce that its Ordinary Shares will today commence trading on the Toronto Stock Exchange ("TSX") under the trading symbol "POL". This follows the announcement regarding a conditional listing made by Polo on 9 March 2010.

The Company's shares which previously traded under the symbol PRL on the Alternative Investment Market ('AIM') of the London Stock Exchange, will also trade under the symbol "POL" on AIM effective from 6 April 2010.

Emerging Metals have released a Notice of Meeting of Shareholders and Disposal

From that notice:

...the Company's other significant asset will continue to be its
interest in the Tsumeb Slag Stockpiles Project...

No comment on the 360000 EXT shares held, which I feel would be a significant asset. I assume that these have been sold.

AIUI, EML and PRL  (and SD) are considered to be associated by the ASX. Therefore a sale that pushed the joint holding below 10% of EXT should be reported.

Chris

Japanese trading house ITOCHU to acquire 15% equity interest

Ambrian 26 March 2010

Nippon Uranium Resources (Australia), a wholly-owned subsidiary of the Japanese trading house ITOCHU Corporation, has agreed to acquire a 15% equity interest in Kalahari. ITOCHU has stated that this is a long-term strategic shareholding, and that it currently does not intend to make an offer for Kalahari. ITOCHU is a 150-year old major Japanese trading house, with a long history in the uranium market. It has activities in Namibia, where it has an interest in the offshore Kudu gas field.

While the announcement does not make the source of the stock clear, we assume the stake will be bought in the market from existing shareholders (ie, 62.6m shares). There was some 21.5m turned over overnight at 185p, and Nomura - which acts as financial adviser to ITOCHU and Nippon Uranium Resources - has advertised having traded 43m shares (and UBS 26m shares). Kalahari has requested ITOCHU nominate a director to its Board to ensure this strategic relationship is maximised to the benefit of all its stakeholders.

Kalahari owns a 40.44% stake in Extract Resources, which intends to release a resource upgrade for its Rossing South uranium project in Namibia in 3Q10 to incorporate drilling since July 2009, with a DFS to be released in 4Q10.

This event not only adds a major new strategic shareholder to the Kalahari register, but also effectively mops up the short-term investment positions in the market. This should support Kalahari moving towards target price levels.

We expect, given the size of the resource, an expansion on the base case 15Mtpa plant (~15Mlbs U3O8/US$523m EBITDA pa). Specifically, we think 20Mtpa is highly likely (~20Mlbs U3O8/US$697m EBITDA pa), or even up to 25Mtpa in the longer term (~25Mlbs U3O8/US$871m EBITDA pa).

http://www.kalahari-minerals.com/News/Analyst_Research/Japanese_trading_house_ITOCHU_to_acquire_15~_equit/News.aspx?id=178


This is the second time Ambrian has mentioned a possible increase in production levels.

The first was on the 18/02/2010.

QUOTE
"Key share price drivers for Kalahari will be the release of a resource upgrade and following pre-feasibility data around mid-year. We expect the pre-feasibility will indicate production throughput higher than the 15Mtpa in the scoping study given the size of the resource, and note that even at a conservative US$50/lb, 6x EBITDA lifts from 2.69GBP/KAH share at 15Mtpa to 3.58GBP at 20Mtpa. For energy bugs, 6x EBITDA at 25Mtpa and US$60/lb equates to 6.20GBP/KAH share, although it is probably too early to be banking on reaching 25Mtpa!"

http://www.kalahari-minerals.com/News/Analyst_Research/Infill_Drilling_Results_-_More_wide~_high-grade_zo/News.aspx?id=165


Could it be that Dattels has done a deal with Itochu with regards to an off-take agreement?

Perhaps Itochu did not want to get into a bidding war with Kepco, for a stake in EXT, and have done a deal with Dattels, with regards to Itochu making a substantial off-take agreement offer to EXT, in return for the stake in KAH?

Should Kepco be successful in acquiring a stake in EXT, which would no doubt include a substantial off-take agreement, this would then make it economically viable for EXT to invest in a larger plant to increase production levels.

After all it is no good increasing production levels to 20 or even 25Mlbs, if there is no guarantee of a purchaser.

Could this be the reason for the delay in resource upgrade and DFS?

Regards

Steve

POLO Rns out.

Neil Herbert appointed Co-Chairman


Polo Resources (AIM: PRL), is pleased to announce that Neil Herbert, a Director
of the Company since 2008, has been appointed Co-Chairman of the Board of
Directors together with Stephen Dattels, Chairman of the Board since 2008.

Neil Herbert, Chairman of Polo Resources, said:

"Over the last year Polo has transformed itself into a company with cash and
near-term investments valued at US$187.6 million* together with coal mining
interests in Australia, Bangladesh and Mongolia. The Company is now set to
embark on a new growth strategy and I am pleased to join Stephen Dattels in
chairing the Company, as we enter this phase of development."

* Based on the closing prices on 26 March 2010



"The Company is now set to embark on a new growth strategy and I am pleased to join Stephen Dattels in
chairing the Company, as we enter this phase of development."

More news re KAH holding due very soon IMO.

Hi All

I posted the answer below on HC to a question with regards to a sp valuation for EXT, based on 15% sale of KAH to Itochu.

Regards

Steve


Hi Skip


QUOTE

"March 26 (Reuters) - Japanese trading firm Itochu Corp will buy a 15 percent stake for 8.5 billion yen ($92.28 million) in London-based mining company Kalahari Minerals Plc , the Nikkei (news) business daily said.

The move will give Itochu (Munich: 855471 - news) an effective stake of 6 percent in Rossing South, a 60 billion yen uranium mining project Kalahari is undertaking in Namibia, one of the world's richest sources of the radioactive metal, the paper said."


So effectively Itochu is paying US$92.28 for an indirect 6% stake in EXT. Which would equate to paying an EXT SP of ~A$7.06.

Now it is important to remember that this is not the same as buying a direct stake in EXT. There is a far greater risk buying a stake in KAH as apposed to a direct stake in EXT. Also Itochu's power to influence decisions of EXT is far less, as they do not have a seat on EXT's board, only one vote on KAH's board.

Historically KAH has trade at 20% discount to the NAV of its 40% stake in EXT.

Therefore if you apply the historical discount of 20% to the A$7.06 paid we get a figure of ~A8.83. Which fairly close to the A$9.04 current valuation that WHIreland gave in their March 24 Brokers Note on EXT.

However even at A$8.83, it still seem very cheap, and a great deal for Itochu!

Regards

Steve

Polo have made it clear that their preference is to focus more on coal than uranium at present. I suspect that if/when Polo sells its stake in Extract, means will be found for Dattels' personal stake in Extract to be sold at more or less the same time. ;0)

Cheers,

Mark

Does anyone think that dattels exiting cos he thinks extract are going to go mining and he's not going to get his big payday so he's selling up and moving on or is he just making sure there are enough players at the table? With him apparently off the decision making team at polo where does his interests lie? i know he's holding a stake in ext directl but who's to say he's not about to sell that to the koreans? any thoughts?

Hi All

The link below is for a 16 page "Namibian Uranium Focus" supplement in the March 2010 issue of Mining Journal

http://www.mining-journal.com/__data/assets/supplement_file_attachment/0003/207642/Namibia_scr.pdf

Gives good background information on all the main players including Extract.

Regards

Steve

...and Regent Pacific. Mr Dattels seems to be losing his appetite for uranium. Now we await an announcement regarding Polo's stake in Extract.

On 25 March 2010 (and after Hong Kong market close) the Company

executed an order with its Broker to sell its entire remaining stake in

Kalahari on AIM to the Purchaser for GBP 1.85 (or approximately

US$2.775 or HK$21.645) per Kalahari Share, by way of an over the

counter block trade. The block trade will settle and all cash

consideration will be received on 1 April 2010.

 

Immediately prior to executing the order to sell our remaining Kalahari stake, the Company held 6,325,123 Kalahari Shares, representing approximately 2.81 per cent. of the issued share capital of Kalahari.

Confirmation of the Reuters report from Kalahari

Interesting reading from the Nippon Uranium release

*For the purposes of Rule 2.8 and other relevant provisions of the City Code on Takeovers and Mergers (the "City Code"), Itochu reserves the right to announce an offer or possible offer or make or participate in an offer or possible offer for Kalahari and/or take any other action which would otherwise be restricted under Rule 2.8 of the City Code within the next six months, in the event that:

(i) an agreement or recommendation from the board of Kalahari is or will be forthcoming; or

(ii) there is an announcement by a third party of a possible offer or a firm intention to make an offer for Kalahari or Kalahari announces that it has received an approach in relation to a possible offer from a third party; or

(iii) Kalahari announces a "whitewash" proposal for the purposes of Rule 9 of the City Code or a reverse takeover; or

(iv) there is a material change of circumstances.

I wonder who sold those shares to Nippon Uranium?

Chris

Link: http://uk.reuters.com/article/idUKSGE62O0IR20100325

(Reuters) - Japanese trading firm Itochu Corp (8001.T) will buy a 15
percent stake for 8.5 billion yen ($92.28 million) in London-based mining
company Kalahari Minerals Pl (KAH.L), the Nikkei business daily said.

The move will give Itochu an effective stake of 6 percent in Rossing South,
a 60 billion yen uranium mining project Kalahari is undertaking in Namibia,
one of the world's richest sources of the radioactive metal, the paper
said.

Itochu's investment in Kalahari Minerals is expected to ensure a stable
supply of uranium for Japan.

Kalahari Minerals is the top shareholder in Extract Resources
(EXT.AX)(EXT.TO), the Australia-based sole stakeholder in Rossing South.

The deal comes as a number of countries, including the United States, are
planning new nuclear power plants, it said.

Production is slated to begin in 2013 at 5,700 tons a year, the equivalent
of more than 10 percent of the uranium mined worldwide in 2008, the paper
said.

Output could eventually reach 220,000 tons, making the area the world's
second-most productive source of uranium, behind a deposit in Australia, the
paper said.

Itochu ranks second in the world in annual uranium sales, with about 4,000
tons.

Rival trading companies Sumitomo Corp (8053.T), Marubeni Corp (8002.T),
Mitsubishi Corp (8058.T) and Mitsui & Co (8031.T) are involved in
uranium mining projects in Kazakhstan, Australia and other countries, the
paper said. ($1=92.11 Yen) (Reporting by Shailesh Kuber in Bangalore;
Editing by Ratul Ray Chaudhuri)

Hi All

New Brokers Note from WHIreland 23/03/2010.


Buy A$8.00, Valuation A$9.04, 3yr Target A$13.88

· Re-iterate EXT to be a potential takeover target

· Re-iterate our eventual 750Mlb U3O8 exploration target

· Included an additional US$25m capex for 120Mt pre-strip

· Increased projected stripping ratio from 4 to 7:1

· Retained valuation of after-tax NPV12% of A$9.04 ps

http://www.minesite.com/fileadmin/content/pdfs/Brokers_Notes_Jan_10/Brokers_Notes_feb10/Whireland%20-%20extract%20resources%2024.3.pdf


Regards

Steve

Australian Financial Review - March 23 - Page 27

Uranium Play Extracting Some Gains

By David Ciampa

Investors in small uranium play Extract Resources may not be too deterred by the Indian central bank's decision late last week to raise interest rates, which accordingly caught the commodities markets off-guard. While the move may have clouded the global growth picture, Extract investors will be concentrating on the long-term demand for energy increasing - especially from countries like India - and the viability of the energy sources technology.

The stock was the standout performer in the S&P/ASX200 Resources index last week rising as much as 15 per cent, boosted by a 14 per cent jump on Friday amid reports that two Korean groups may make a joint bid for the Australian explorer. Extract owns the Rossing South deposit - considered on of the world's most promising uranium projects - adjacent to Rio Tinto's Rossing mine in Namibia, which both Korea Electric Power Corp and state-run Korea Resources Corp may make a joint bid for, or even extract itself.

As part of a soon-to-be completed strategic review, Extract has been talking to miners and uranium buyers about deals ranging from a stake in the project and an offtake agreement to a full takeover.

Extract, which is 16 per cent owned by Rio, was one of the best performers on the S&P/ASX200 index last financial year, surging more than six-fold.

But it has run out of puff in recent months and last week's gain had the stock at its best level in about two months. Among other fast-growing economies, South Korea is one of a group of Asian countries with soaring energy needs and plans to add eight atomic plants by 2016 and export 80 reactors by 2030.

Korea Electric Power vice president Chang Joe Ok said the company was interested in the Rossing South mine in Namibia owned by Extract, but added that "pricing is the most important factor". The South Korean group is reported to be undecided whether to bid for a stake in the Rossing South mine or Extract Resources itself.

Canadian broker Haywood Securities has placed a $10.10 price target on the company.

Rio Tinto-controlled uranium producer Energy Resources of Australia also rose last week after noting that the global financial crisis had created a slump in new mine development that may lead to improved prices for the nuclear fuel.


I assume the Haywood Price Targget is in C$?

If so would be ~A$10.80.

Regards

Steve

of course if the "Possible Problems Resolved" is actually "Problems Possibly Resolved" the end result won't be so pretty :(

db

One point which i noted from this report:

The different average valuations of the companies from:

Exploration stage 3.38 CAD to

Pre-Feasibility stage 2.02 CAD to

Feasibility stage 2.62 CAD to

Development stage 2.74 CAD to finally

Production stage 5.97 CAD

All prices are up-to-date average market valuations and subject to change.

This corresponds with the following picture,which shows a shareprice model for exploration companies:

Here is a very detailed comparison of TSX listed uranium stocks.Although this report does not consider all the facts and thus i personally dont agree with many of their "implied values" (e.g. nothing of the very likely-if not definitely sure resource upgrade for EXT is included) this report gives a very wide variety overview over the sector:

http://smallcapepicenter.com/images/Uranium%20Weekly%20-%2003182010.pdf

Busy today! 

Korea Electric May Bid for Stake in Extract Resources (Update3)

March 19, 2010, 3:52 AM EDT

“Namibia is politically stable and would be a good target,” said Park Young Ho, head of Africa and Middle East research at Korea Institute for International Economic Policy, a government think tank. “Most attractive mines in Africa are already owned by major global companies, and it would be risky for a South Korean company to enter the market by itself. The stake purchase would be one of the safe options.”

...

The South Korean group hasn’t decided whether to bid for a stake in the Rossing South mine or Extract Resources itself, a Korea Resources official familiar with the plan said, declining to be named because internal discussions are still ongoing. Cho Hye Won, a spokeswoman at Korea Resources, declined to comment.

Stakes in Mines

Perth-based Extract Resources advanced the most since Dec. 23, 2008, to close at A$8.35. Korea Electric fell 0.3 percent to 38,550 won in Seoul, compared with the 0.7 percent gain in the benchmark Kospi index.

Korea Electric was chosen by Extract Resources as one of its preferred bidders last month after the utility made a non- binding offer for a stake in the uranium explorer, Chang said.

The South Korean companies will make a binding offer after conducting due diligence on the Rossing South deposit and getting approval at the end of this month from an internal investment review committee, according to Chang.

The game seems to be hotting up

Chris

...and: http://www.businessweek.com/news/2010-03-19/korea-electric-may-bid-for-stake-in-extract-resources-update1-.html

Korea Electric May Bid for Stake in Extract Resources (Update2)

March 19, 2010, 1:03 AM EDT

By Shinhye Kang

March 19 (Bloomberg) -- Korea Electric Power Corp. and state-run Korea Resources Corp. may make a joint bid for a stake in Extract Resources Ltd., an Australian explorer that owns a uranium mine in Namibia, to obtain supplies of the nuclear fuel.

“We’re interested in the Rossing South mine in Namibia owned by Extract,” Chang Joo Ok, vice president of Korea Electric Power and head of its overseas energy development team, said in an interview in Seoul yesterday. “But pricing is the most important factor.” Cho Hye Won, a spokeswoman at Korea Resources, declined to comment.

Extract Resources rose 11 percent in Sydney today after more than doubling over the past year as investors bet countries will increasingly turn to nuclear power. South Korea is aiming to add eight more atomic power plants by 2016 and export 80 reactors by 2030. Korea Electric emerged as a rival to General Electric Co. and Areva SA after beating them in December to a $20 billion order to build reactors in the United Arab Emirates.

“Korea Electric’s efforts to buy overseas uranium assets will allow it to avoid volatile changes in prices of the fuel in the future,” Kim Seung Woo, an analyst at Samsung Securities Co., said by telephone in Seoul.

Extract Resources, 15 percent-owned by Rio Tinto Group, continues to evaluate potential partners to join its Namibian project, Chairman Steve Galloway said in an e-mail today, when asked to comment on a possible joint bid by Korea Electric and Korea Resources.

The South Korea group hasn’t decided whether to bid for a stake in the Rossing South mine or Extract Resources itself, a Korea Resources official familiar with the plan said, declining to be named because internal discussions are still ongoing...

Cheers,

Mark

With thanks to fireblade1, Fosters Stockbroking report

Corporate Transaction Comparables

Comparing EXT resources to transactions in the industry gives a feel for what value a party may have to pay to buy into the project or make a bid for the whole company.

In December 2009 Areva and Kepco (Korea Electric Power Corporation) signed a deal to jointly develop the Imouraren mine in Niger. Under the terms of the agreement, KEPCO will take an indirect 10% stake in the Imouraren SA mining company, jointly owned by Areva and Niger's government. KEPCO will be entitled to 10% of the mine's lifelong production. Kepco's investment of US$253m equates to ~US$7.50/lb resource.

................However, when evaluating EXT, the sheer size of the resource cannot be underestimated and, in our view, the ultimate resource base will be large enough to build two of the projects envisaged in the preliminary feasibility study which would make it the world's largest uranium producer.

A project level equity sell down, or even the possibility of one, may force RIO's hand or at least demonstrate the value of the project and move it a step closer to development. Either way, it appears that after a quiet period and a significant share price pull back associated with a fall in the uranium price, EXT is set to re-rate driven again by corporate activity.



...........We have set a price target of $12.50/share reflecting our view of an ultimate resource size of greater than 500Mlb and applying a value of US$5.00/lb resource.

Recommendation. BUY EXT, (Price: $7.30; PT $12.50/share, Diluted Mkt Cap. $1.8b)

Also, news from RIO about thawing relations with China:

RIO Tinto has signed a $US1.35 billion ($1.46bn) deal with Chinalco to develop its massive Simandou iron ore project in Guinea.

Under the terms of a non-binding memorandum of understanding, Rio Tinto, which currently owns 95 per cent of the project, said that it will transfer its holding into a new joint venture with Chinalco, with the Chinese group taking a 47 per cent interest for $US1.35bn.

Hopefully, this'll free up enough cashflow for RIO to snap up their pesky neighbour at RS (for a proper price).

EXT up A$1.05 overnight in Oz. May be expiring options as its the 3rd Friday of March, but still positive IMO.

Chris

...also (and probably more significant) with thanks to G-Member on another forum: http://www.namibian.com.na/news-articles/national/full-story/archive/2010/march/article/south-korea-here-to-talk-uranium/

A HIGH-POWERED state and private sector delegation of South Korea will arrive in Namibia on Saturday for a short visit to talk uranium and nuclear power business.

Leading the delegation will be presidential envoy Lee Sang-deuk, a member of the South Korean Parliament and the elder brother of the country's president, Lee Myung-Bak...

...Dow Jones Newswires said the tour aims "to promote its nuclear power plant industry and uranium development". The agency recently also reported that SK Energy Co is part of a South Korean consortium, Kepco, trying to get its hands on 15 per cent in Extract Resources' Rössing South, which promises to become one of the three biggest uranium mines in the world within the next five years...

Cheers,

Mark

I've started a new thread to highlight & discuss a T/O deal between Niger Uranium Ltd shareholder AfNat Resources and TSX-V listed AXMIN: http://www.stockopedia.com/forum/view/38615/takeover-by-axminaddax-oryx

Cheers,

Mark

Australian Financial Review 17/03/2010

Page 20 Street Talk


Extract keeps suitors in suspense

Uranium hopeful Extract Resources is nudging closer to the completion of its strategic review, with the outcome of the process, run by Rothschild, expected within the next month.

Extract owns the Rossing South deposit –considered one of the worlds most promising uranium projects –adjacent to Rio Tinto's Rossing mine in Namibia (Rio owns 16% of Extract).

As part of the review process, Extract has been talking to miners and uranium buyers about deals ranging from a stake in the project and a offtake agreement to a full takeover.

It had launched the project after receiving unsolicited expressions from several parties and the expectation is that the best proposals - of varying sorts –will be put forward soon to allow it to make a decision.

Interestingly, the parties involved are believed to have signed standstill agreements, which presumably would expire, once Extract chose its path, paving the way for a takeover later if another deal is done at this stage.

At the moment, some think the most likely outcome is that a utility will take about a 15% stake to help develop the project. As Uranium One noted this week, with a $1.8 billion market value and no operating mine yet, Extract isn't a cheap proposition.

Extract has delayed the issue of an updated resource statement until the third quarter but there are suggestions it could a figure of up to 400 million tonnes of ore at a time.

Kalahari comment on the announcement, explaining the possible 3 month delay in the schedule:

Kalahari Executive Chairman Mark Hohnen said, "We are highly encouraged by this
news, which confirms that Extract is making strong progress towards publishing
the Rössing South Definitive Feasibility Study, and in turn, attributing
additional value to its world-class Husab Uranium Project. In particular, it
should be noted that the operating costs are unlikely to be significantly
different to those stated in the scoping study announced in August 2009,
indicating that the Rössing South project is still set to be a profitable, low
risk, bulk tonnage, open pit mine with a mine life in excess of 20 years.

"Kalahari remains fully supportive of the development work conducted by
Extract, and we now eagerly await an upgraded resource from Zones 1 and 2 of
Rössing South. We believe this will not only considerably increase the overall
size of Extract's uranium resource, but will also reiterate the global
significance of this mineralised system. Indeed, the delay in the definitive
feasibility study is attributable to the fact that the resource continues to
grow in size, which increases the time required by Extract to better define the
ore body, and in particular to identify the high grade resource. This approach
by Extract will ensure that an optimum development plan can be determined in
order to maximise the true potential of this outstanding uranium project."

Cheers,

Mark

EXT have issued a Feasibility Study Update overnight in Aus:

Extract aims to announce an updated Rossing South resource in Q3, 2010.  This revised resource estimate will incorporate infill and extensional drilling that has been completed since July 2009.  The updated estimate is expected to increase the overall size and confidence levels of the Rossing South resource.

Extract's half year report to December 2009 is now out: http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01044370

Cheers,

Mark

PS I would add that I do think Leslie made some poor career choices but I see no evidence that he did a poor job in what were undoubtedly very difficult circumstances at both Sappi and Nikanor.

Hi wantedman,

Here is a critique and some further information on "John Smith"'s post:

However, my broker was able to contact someone outside of Rio that was able to shed light on the employment of JL at Rio. Seems as if the career path of JL was limited, with average performance.

 

After a 26 year career with Rio, Jonathan Leslie was appointed to the main Board, as Mining Director. Does that fit the description of someone with a "limited career path" and displaying "average performance"?

Here is an article relating to Leslie's departure from Sappi: http://www.busrep.co.za/index.php?fArticleId=3143594

The announcement of Leslie's resignation was not the only break from the tradition of quiet, quick and uneventful AGMs.

A group of representatives from one of North America's largest trade unions, United Steel Workers of America (USW), raised questions about the effectiveness of the Sappi board and said Leslie's departure was symptomatic of a wider problem in the group and of the disarray at its top level.

"There is a much higher turnover of management in Sappi's US mills compared with well-run mills in the US," said Keith Rowig of USW. He added that at three of Sappi's US mills, workers had no contracts.

"Do you think there is a direct correlation between your labour problems in America and the disappointing performance from that region?" Rowig asked the board.

He went on to say that if the Sappi board could "detach itself from the old ways of doing business and its arbitrary management style it could become the world-class company it deserves to be".

It doesn't sound to me like Leslie's performance was the issue, more like van As' dictatorial style and not letting go of the helm.

Concerning Leslie's time at Nikanor (with thanks to BeerBaron in another place):

Nikanor involved a mine (KOV) that had fallen into a considerable state of disrepair, in one of the most unstable countries in Africa. It is hardly surprising that there were errors in cost projections. I have found no information to back the claim that JL was "instrumental" in the delays at KOV. JL was not fired, Nikanor was merged with Katanga (1) and "ceased to be".

Source:

(1) Katanga, Nikanor tie-up to create African mining giant 6 Nov 2007 (original article not available on-line. Start reading article on page 4 of 5 page Word document.)

It appears to me that "John Smith" has posted defamatory lies.

Regards,

Mark